Sep
25
2023
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Do Student Loans Count as Income?

By | Fresh Out of School, Student Loans, student_loan | No Comments

On top of sorting out whether you’re eligible for federal student loans and the difference between subsidized and unsubsidized loans, you may be wondering how student loans may impact your taxes and whether student loans count as income. In a nutshell, the answer is no, student loans are debt, and do not count as income.

Fellowships and other forms of financial grants, however, may be counted as income, depending on how the funds are spent. And loans that are forgiven have counted as income.

Read on for more about the tax implications of student loans, grants, and student loan repayment. Of course, this is just a helpful guide as you begin to explore the basics of student loans and taxes; always seek out a tax professional to help you with your specific situation.

Are Student Loans Taxable?

There are multiple types of student loans — each with their own unique terms. As noted earlier, though, student loans are not taxed as income.

This is true of other types of loans generally as well, like credit card spending, mortgages, and personal loans (unless the loan is forgiven) — basically most credit that needs to be repaid. The IRS considers student loans a form of debt — not income — therefore, it is not taxed.

The only time that student loans (or other types of debt) can be taxed is if they are forgiven during repayment. If you are eligible for a federal student loan forgiveness program and have met the requirements (which vary, and may include stipulations like making eligible payments for 20 to 25 years via an income-driven repayment plan or completing eligible public service work/payment requirements, and others), the remaining balance on your student loans (the amount forgiven) may be taxed as income, depending on the repayment plan. This could amount to a hefty tax bill.

Are Scholarships Taxable?

The high-level answer to this question is: it depends. There are many different forms of scholarships, grants, and fellowships that are awarded to students to cover the costs of studying and research. Some are need-based and some are merit-based. The basic difference between scholarships and loans is that a scholarship is given while a loan is borrowed. You won’t typically have to pay back a scholarship, but you do have to pay back a loan.

Most scholarships are not taxed when you are enrolled in a formal educational institution and the scholarship is directly used to cover the costs of tuition, fees, books, and supplies used for study.

There are some situations in which scholarships can be taxed, however. For instance, a scholarship can be taxed as income if you use it to cover what are considered “incidental” expenses related to your education such as travel, room and board, and supplementary equipment and supplies.

Another type of scholarship that can be taxed is a scholarship that has a service-related requirement to it. This frequently applies to scholarships for graduate students. If you are required to teach, provide research assistance, or perform other services as a condition of your scholarship, it can be taxed as income and you will be required to report the scholarship as part of your gross income.

(For more about which types of scholarships are considered income and what scholarship-related activities are taxable, check out IRS Publication 970 .)


💡 Quick Tip: Get flexible terms and competitive rates when you refinance your student loan with SoFi.

Do Student Loans Come with Any Tax Benefits?

Student loans aren’t usually taxable as income, and in fact, may come with a tax benefit that is meant to make repayment a little easier on borrowers investing in their education.

The Student Loan Interest Deduction allows you to deduct the amount of interest you paid on both federal and private student loans, up to a maximum of $2,500 per year. In order to be eligible to deduct the full amount, your modified adjusted gross income (AGI) must be $70,000 or less (or $145,000 for married couples filing jointly). The amount you’re allowed to deduct is gradually reduced if your modified AGI is more $70,000 but less than $85,000 (or more than $145,000 but less than $175,000 for married couples filing jointly. Income above these thresholds renders you ineligible for the deduction.

As a tax deduction, the amount deducted helps to lower your overall taxable income, potentially resulting in a lower tax bill or higher tax refund. This deduction can also help defray some of your repayment costs.

Are Employer Student Loan Payments Taxable?

An increasingly popular benefit offered in some workplaces is help with education costs and student loan repayment. Employers such as Aetna, Fidelity Investments, Google, and more offer student loan assistance programs to employees.

Currently, employers are allowed to contribute up to $5,250 toward employees’ qualified education costs tax-free. Payments or reimbursements above that amount are considered taxable income for the employee. It’s important to note that this special tax treatment is temporary, however, and expires December 31, 2025. After this date, the full amount of any employer contributions toward education expenses or student loan repayment will be taxed as income.

How Can I Make My Student Loan Repayment Easier?

The cost of a student loan comes in the form of the interest you pay each month on the balance owed. Consider this example: Say you have a $30,000 loan with a 7% interest rate. On the 10-year Standard Repayment Plan, you would pay roughly $11,800 in interest in addition to repaying the $30,000 principal.

So what can make repayment easier, other than the student loan interest deduction? One option is to refinance your student loans with a private lender.

If you already have private and/or federal student loans, you may be able to refinance your student loans at a lower interest rate than you currently are paying. If you are eligible to refinance your student loans, you could shorten your term length, qualify to lower the interest rate on your loans, or possibly lower your monthly payment (by extending your term). But you may pay more interest over the life of the loan if you refinance with an extended term.

There are other potential drawbacks to think about. For instance, federal student loans come with several benefits and protections such as forbearance, deferment, income-driven repayment plans, and certain forgiveness programs that private loans do not offer. If you think you might need some of these benefits, or if you are eligible for student loan forgiveness, it might not be the right time to refinance.

However, if you have a steady income and good cash flow — along with other aspects of your financial picture that are appealing to a lender — and you are ready to focus on paying down your loans, refinancing might be the right solution for you.

SoFi is a leader in the student loan space, offering refinancing options to help you save on the loans you already have.

The Takeaway

Generally, student loans are not considered income, so they are not taxed. The exception is when some or all of your student loan balance is forgiven. In some cases, the IRS may count the canceled debt as taxable income.

Educational grants and scholarships, on the other hand, may or may not count as income. Typically, they are taxed when they are spent on expenses outside of tuition and fees, such as room and board and travel.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.


With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.


Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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25
2023
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Finding Jobs That Pay Off Student Loans

By | Building Your Career, Fresh Out of School, Life & Career, Student Loans, student_loan | No Comments

Jobs that help pay off a portion of student loans are becoming more common and for a good reason. The average federal student loan borrower has over $37,000 in student loan debt, while borrowers with private student loans owe nearly $55,000, on average.

Companies that help to repay a portion of student loans are in the minority, so you may have to do some research to get student loan assistance as a benefit. To help you, here’s what to know about what’s available, companies that offer this perk, and what you can do to try and negotiate for it.

Types of Job-Based Student Loan Assistance Programs

There are two types of student loan assistance you may receive through an employer: repayment assistance programs where your employer is a participant and repayment assistance benefits your employer offers directly.

Repayment Assistance Programs

Depending on your career field, you may be eligible to receive student loan assistance through a federal or state program. There are several programs for those working in public service careers, like the Public Service Loan Forgiveness (PSLF) and Teacher Loan Forgiveness programs, which cancel existing balances for eligible borrowers who meet certain requirements.

That said, these programs typically require you to commit to working in a specific job or a certain area (such as medicine, law, or military service, for example) for a set number of years, which can be challenging if you don’t enjoy the job or want to pursue a different career path somewhere else.

But if you fulfill your service obligation, you may get as much as your full student loan balance is forgiven.

Recommended: A Guide to Military Student Loan Forgiveness

Repayment Assistance Benefits

At the start of 2022, about 7% of employers in the U.S. offered student loan repayment assistance as a benefit, according to the Society for Human Resource Management. The terms of repayment assistance benefits can vary by employer. For example, some may offer to match a portion of the employee’s payments and others may simply pay a set amount toward an employee’s loan balance each month.

The amount you receive from a repayment assistance benefit may be less than what you might get through a government repayment assistance program. But you may not need to commit to a service obligation to qualify, and you may be able to negotiate how much you’ll receive.


💡 Quick Tip: Get flexible terms and competitive rates when you refinance your student loan with SoFi.

Types of Jobs That Offer Student Loan Forgiveness

In order to qualify for certain types of loan forgiveness, borrowers may need to meet certain employment requirements. Here are some of the jobs that could potentially allow someone to qualify for federal student loan forgiveness programs.

1. Federal Agency Employee

The federal student loan repayment program exists for employees of the federal government, and allows a portion of their federal student loans to be paid off each year. The benefit permits for up to $10,000 in payments each calendar year, not to exceed a total of $60,000 for any one employee.

In order to qualify for this student loan repayment assistance, the employee is required to sign onto a minimum three-year contract with the agency. If they leave the agency early, they’ll need to repay any benefits received.

2. Public Service Worker

If you work full-time in the public service sector for a qualifying organization, such as the government or a non-profit, you may qualify for Public Service Loan Forgiveness (PSLF).

To pursue PSLF, borrowers need to have Direct loans and be enrolled in an income-driven repayment plan. (If you have other types of federal loans, such as Perkins loans, you’ll need to consolidate them into a Direct loan to qualify.) Forgiveness is awarded after making 120 qualifying payments and certifying all employers.

3. Medical Field

The Association of American Medical Colleges maintains a database with information on loan assistance programs for doctors by state.

Medical professionals who work in certain underserved areas may also qualify for loan forgiveness through the National Health Service Corps Loan Repayment Program. In this program, medical professionals must commit to working for at least two years at an NHSC-approved site in a Health Professional Shortage Area (HPSA).

Refinancing medical school student loans may be another option to consider for medical professionals who are not pursuing any loan forgiveness programs. While refinancing would eliminate loans from any federal forgiveness programs, it could potentially allow borrowers to secure a more competitive interest rate.

4. Automotive Professionals

Professionals in the automotive industry may qualify for loan forgiveness through the Specialty Equipment Market Association (SEMA) Loan Forgiveness Program. To be eligible, you must work for a SEMA member business and have at least $2,000 in outstanding debt, among other qualifications.

5. Lawyer

In addition to PSLF, there are other lawyer-specific programs that provide assistance to lawyers paying off student loan debt. These include the Department of Justice Attorney Student Loan Repayment Program or John R. Justice (JRJ) Program.

6. Teacher

Student loan forgiveness for teachers is available. Teachers who work in special education are considered highly qualified teachers or work in underserved areas may qualify for the Teacher Loan Forgiveness Program. The amount of loan forgiveness available is dependent on the teacher’s area of specialty and can be either up to $17,500 or up to $5,000.

7. Peace Corps

Peace Corps volunteers may be eligible to defer their loans or pursue PSLF. Additionally, while on a qualifying repayment plan, payments could be as low as $0 per month while volunteering.

8. Veterinarian

Veterinarians who work in underserved areas may qualify for up to $25,000 in student loan repayment assistance through the U.S. Department of Agriculture’s Veterinary Medicine Loan Repayment Program. Eligible veterinarians must agree to serve in a NIFA-designated veterinarian shortage situation for a period of three years to qualify.

15 Major Companies that Repay Student Loans

Hundreds of large and small employers offer jobs that pay off student loans, but it’s not always easy to find out which ones provide the benefit. To help you get started, here are 15 well-known companies that repay student loans.

1. Abbott Laboratories

The company’s Freedom 2 Save program functions a bit differently than other repayment assistance benefits in that it combines efforts to pay off student loan debt and save for retirement.

Full- and part-time employees who qualify for the company’s 401(k) plan and contribute at least 2% of their eligible pay toward student loan repayment will receive a 5% contribution to their 401(k) account. Employee contributions to their 401(k) contributions aren’t required to receive these funds.

2. Aetna

In addition to a tuition reimbursement program, healthcare company Aetna also matches student loan payments for eligible employees who meet certain requirements. For full-time employees, the program matches student loan payments up to $2,000 per year, with a lifetime maximum of up to $10,000 for qualifying loans. For part-time employees, the program matches up to $1,000 a year, with a lifetime maximum of $5,000.

3. Ally Financial

Financial services company Ally provides $100 per month toward student loan payments, with a lifetime maximum cap of $10,000. The company also reimburses tuition up to $10,000 per year to help employees keep educational debt to a minimum.

4. Chegg

Education company Chegg has paid out more than $1 million toward employee student loan debt through its Equity for Education benefit. For entry-level employees through manager level, those who have worked at the company for at least 2 years receive up to $5,000 annually. Employees at the director or vice-president level can receive up to $3,000 annually.

5. Estee Lauder

The beauty company provides employees with $100 per month in student loan assistance, up to a lifetime maximum of $10,000.

6. Fidelity

As an employee of the investment brokerage firm, you may be eligible to receive up to $15,000 toward your student loan payments.

7. Google

Google matches up to $2,500 in loan payments per employee each year.

8. Hulu

Streaming service Hulu pays up to $1,200 a year per employee to match their student loan payments.

9. Live Nation

Entertainment company Live Nation Live Nation matches employee contributions of up to $100 per month, or $1,200 a year. The lifetime maximum is $6,000 in benefits. Employees must be employed with the company for at least six months to qualify.

10. New York Life

New York Life’s student loan assistance program, Vault Pay, contributes $170 per month over five years toward student loans that are in good standing. In other words, employees can receive up to $10,200 while enrolled in the program.

11. Nvidia

If you’ve graduated within the last three years, Nvidia will match your student loan payments dollar for dollar up to $3500 per month. The lifetime cap is $30,000 in assistance. To be eligible, you must be a full-time or part-time U.S. employee working 20 hours or more per week.

12. Penguin Random House

New York Life’s student loan assistance program, Vault Pay, contributes $170 per month over five years toward student loans that are in good standing. In other words, employees can receive up to $10,200 while enrolled in the program.

13. PricewaterhouseCoopers (PwC)

As a participating associate or senior associate, you can receive $1,200 in student loan payments each year. The company estimates that this benefit can help to reduce student loan principal and interest by up to $10,000, and shorten loan payoff by up to three years.

14. SoFi

As an employee with SoFi, you’ll get $200 each month in student loan repayment assistance. The company also provides free financial classes.

15. Staples

Eligible employees for the Staples student loan assistance program include active, full-time U.S. associates with at least one outstanding loan obligation. Participants must also have obtained or are in the process of receiving a degree from an accredited institution. The company pays $100 per month toward loan principal for 36 months.

How Is Student Loan Assistance Taxed?

If you receive student loan assistance or cancellation, it’s important to understand the tax consequences. Depending on the situation, you could be responsible for a tax bill.

The IRS typically considers canceled debt to be taxable income. That includes most student loan debt forgiveness or discharge, except for PSLF. However, the American Rescue Plan Act of 2021 exempts borrowers who are working toward loan forgiveness from having their forgiven balances taxed if their loans were discharged between January 1, 2021, and December 31, 2025. This only applied to federal taxes, though, and some states may still require forgiven student loans to be taxed as income.

As for employer-sponsored assistance programs, a temporary pandemic-era provision allows employers to contribute up to $5,250 per year in tax-free funds toward qualified education costs for employees. Any contributions above that amount are considered taxable income for the employee. However, this special tax treatment expires December 31, 2025, after which any amount of employer payments or reimbursements for education expenses or student loan repayment will be taxed as income.



💡 Quick Tip: Refinancing could be a great choice for working graduates who have higher-interest graduate PLUS loans, Direct Unsubsidized Loans, and/or private loans.

Negotiating a Student Loan Repayment Benefit

If you’re looking for a job, keep an eye out for companies that repay student loans as an employee benefit. If you can’t find one, you can still try to negotiate the benefit into your total compensation. Here are some ways to do it.

Doing Your Research

Resources such as Payscale and Glassdoor can help give you an idea of the salary and benefits that may be available from various companies. Look at what the company you’re interested in typically offers as well as what you might get with a similar position somewhere else.

If anything, this process can give you a better idea of what you’re worth. But it will also give you a benchmark that you can use to negotiate for student loan repayment benefits, along with other aspects of your compensation.

Making Your Interests Clear

Helping a potential employer understand why student loan repayment is important to you can help set the stage for the entire conversation.

In addition to salary, employers can consider several other factors to make up your total compensation. So knowing what’s most important to you can help them make a more attractive offer.

Asking for a Signing Bonus Instead of Monthly Payments

While a signing bonus isn’t specifically designed as a student loan repayment benefit, you can use it that way. In fact, making a lump sum payment toward your student loans could help you accelerate your student loan debt repayment timeline.

Recommended: How to Negotiate Your Signing Bonus

Asking for the Opportunity to Revisit the Request in the Future

If you can’t manage to persuade a potential employer to provide you with student loan assistance, that may not be the end of it. You could ask for the chance to talk about your compensation again in six months or a year.

During that time, you may be able to prove to your employer that it’s worth the investment on their part. Or you may have planted a seed for the employer to create a student loan repayment benefit for all employees.

Making Student Loan Repayment a Priority

Whether or not you can find jobs that pay off student loans, you can still make it a priority to eliminate your student debt as quickly as possible. A student loan repayment assistance benefit can help you achieve that goal, but it can’t do it on its own.

As such, it’s essential to consider other options to save money, such as refinancing your student loans. While refinancing can be a helpful option for some borrowers, it won’t make sense for everyone. If federal student loans are refinanced, they’ll lose eligibility for federal programs and benefits, such as PSLF or income-driven repayment plans.

If you qualify, you may be able to reduce your interest rate or your monthly payment. With a lower interest rate you could potentially save money over the life of your loan.

The Takeaway

Many companies offer student loan repayment assistance as a part of their employee benefits package. Some jobs might also offer the opportunity for the borrower to apply for student loan forgiveness. For example, there are programs available for medical professionals, teachers, and those that work in the government or non-profit sector.

Another opportunity for managing student loans is refinancing, which could allow qualifying borrowers to lower their interest rates — making the loan more affordable in the long run. If you’re interested in refinancing, consider the options available at SoFi.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.


With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

What careers pay off student loans fastest?

High-paying jobs may help borrowers repay their student loans quickly. However, some jobs may allow borrowers to pursue a loan forgiveness program. While these programs may not expedite the repayment process, they could help make student loan repayment more manageable.

What companies pay off student loans?

Companies including SoFi, Fidelity, Penguin Random House, and Nvidia all offer student loan repayment assistance programs. Specific benefits vary by company.

What kind of jobs qualify for student loan forgiveness?

The type of job that qualifies for student loan forgiveness may vary depending on the program. Jobs in the government or non-profit sector may qualify a borrower for Public Service Loan Forgiveness. Teachers may qualify for Teacher Student Loan Forgiveness programs. Some medical professionals may qualify for programs such as the National Health Service Corps Loan Repayment Program.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.


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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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23
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Can You Refinance Student Loans More Than Once?

By | Debt Payoff, Student Loans, student_loan | No Comments

Yes, you can refinance student loans with a private lender more than once in the quest for a lower interest rate and different repayment term.

How Many Times Can You Refinance Student Loans?

If you’re a graduate who has the credit score and income to qualify, you can refinance your student loans as many times as you’d like. In fact, some folks refinance multiple times.

But before you get too refi-happy, it’s important to know the advantages and disadvantages of this strategy.

What Are Some Advantages of Refinancing Multiple Times?

One of the biggest advantages of refinancing your student loans is that you may be able to qualify for a lower interest rate, whether you refinance once or several times. A reduced rate can help you save money in the long run.

For example, let’s say you’ve been paying down an older federal Grad PLUS loan that currently has a balance of $40,000 and an interest rate of 7.90%. You have 10 years of payments left, which are currently $483.20 per month.

You have good credit and qualify for a seven-year, fixed refinance rate of 6%. If you were to go through with the refinance, you’d actually increase your monthly payment by about $100. However, you’d save about $8,900 in total interest.

Later on, you might qualify for a lower fixed rate or an even lower variable rate, and so on.

Or you might find it helpful to refinance to a longer term, with lower monthly payments. That will likely mean paying more in interest over the life of the loan, but lower monthly payments may put you in a better position to accomplish your short-term financial goals.

Reputable lenders charge no application or origination fees, so refinancing each time will not cost you anything.



💡 Quick Tip: Get flexible terms and competitive rates when you refinance your student loan with SoFi.

What Are Some Disadvantages of Refinancing Multiple Times?

One disadvantage of refinancing your student loans is that your credit score could temporarily drop by a few points. Whenever you apply for a loan, the lender performs a hard credit inquiry. One or two inquiries usually have a small and temporary impact on your score. However, too many hard inquiries within a short time frame could cause some damage. The good news is that many student loan refinancing lenders allow you to shop for rates and get quotes online using a soft credit pull, which has no impact on your score.

Another factor to consider is your time. Though you can refinance as many times as you want, it helps to make sure it’s worth the effort. That means researching reputable lenders and the rates and terms they offer.

It’s important to point out that refinancing federal student loans even once will cause you to permanently forfeit government-backed protections and benefits, such as federal student loan forgiveness programs, deferment, and forbearance.

How Is Student Loan Refinancing Different Than Consolidation?

It’s important to make a distinction between refinancing and consolidation. When you refinance your student loans with a private lender, you are borrowing one new loan with new terms, such as a lower interest rate or different repayment term, and using the proceeds to pay off your existing loans.

When you consolidate federal student loans into a Direct Consolidation Loan, you combine your existing loans into one. The term may be drawn out to up to 30 years, and the interest rate will be the weighted average of the original loans’ rates, rounded up to the nearest eighth of a percentage point. For this reason, your new rate may actually be higher than the rate of your previous lowest-interest loan.

Things to Look for When Refinancing

Whether you refinance your student loans for the first or sixth time, it would be smart to check that your new rate and term make sense for you.

You’ll encounter fixed-rate and variable-rate loans. Fixed-rate loans have one set interest rate that does not change over the life of the loan. The rates on fixed-rate student loans are typically higher than the initial rates of variable-rate loans. However, because the rate never changes, it can make budgeting easier.

Variable-rate loans have interest rates that start off lower, but can fluctuate based on the prime rate or another index. Rates can climb if the rate or index they are tied to goes up (and vice versa).

Variable-rate loans might be a good choice for shorter-term loans. The longer the loan term, the bigger the chance of a rate hike.

Also, beware of qualifying for a low interest rate that’s attached to a longer-term loan. Though monthly payments might be low, a longer term might mean you’ll end up paying much more in interest over the life of the loan. If you can afford the higher monthly payment, loans with shorter terms can be a good cost-saving option.

Consider looking for a refinance lender that offers competitive rates and flexibility in choosing the repayment term. And if you want to refinance both federal and private student loans into one new loan, look for a lender that does that.

Serious savings. You could save thousands of dollars.
We offer flexible terms and low fixed or variable rates.

Refinancing Your Student Loans More Than Once

It’s all about the great rate chase.

Having a low debt-to-income ratio can help you qualify for a lower interest rate. So if you have a higher salary, get a big bonus, or pay off other debts, your debt-to-income ratio might improve.

Similarly, if your credit score increases, you typically become more attractive to lenders. This could happen if you are using a small amount of your available credit, or if you find and correct a mistake on one of your credit reports. (Do student loans affect your credit score? Continuous on-time payments may have a positive effect.)

Married couples may want to consider refinancing student loans together to put the power of two earners to use. A solid cosigner could also be brought aboard.

If you’re thinking about a refinance, it could help to keep an eye on the federal funds rate, which is the rate banks charge one another for overnight loans. When the Federal Reserve raises or lowers short-term interest rates, private lenders respond in turn. (This does not apply to federal student loans, whose interest rates have been set by Congress once a year since 2006.)

Even if interest rates rise now, they could still be considered low by historical standards.

Refinancing Your Student Loans With SoFi

Is it bad to refinance multiple times? If it saves you money, that’s nothing but a good thing. Refinancing won’t be the right move for all people, but everyone should know the rates they’re paying, their total student debt load, and their repayment strategy.

SoFi is a leader in refinancing student loans, with low fixed or variable rates and flexible loan terms.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.


With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

Can I consolidate student loans more than once?

You can consolidate federal student loans into a Direct Consolidation Loan more than once only if you have federal loans that were not included in a previous consolidation, or if you previously consolidated loans under the Federal Family Education Loan (FFEL) consolidation program. Remember that consolidation does not lower your loan rate.

How many times can you refinance a loan?

As many times as you qualify to do so.

How many times can you take out student loans?

When it comes to federal student loans, there is no time limit on how long a borrower can receive Direct Unsubsidized Loans or Direct PLUS loans, but annual and aggregate limits for Direct Unsubsidized Loans apply.

Private student loans, for which you must qualify or have a cosigner, usually have an annual limit equal to an institution’s cost of attendance minus other financial aid. Most have aggregate loan limits for undergraduate and graduate students.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.


Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Pros and Cons of Using Personal Loans to Pay Off Student Debt

Is it Smart to Use a Personal Loan to Pay Off Student Debt?

By | Debt Payoff, Fresh Out of School, Student Loans, student_loan | No Comments

Personal loans hold appeal with their capacity to wipe out debts in a single stroke. With student loan debt hovering at, it may appear at first glance that a personal debt is the answer to the problem.

However, using a personal loan to pay off student debt is widely seen as not the best idea. We will break down the process of taking out personal loans to pay off student loans and explain the serious drawbacks.

Can You Use a Personal Loan to Pay Off Student Loans?

While it may sound possible to use a personal loan to pay off your student loans, either federal or private, many lenders may not approve your application if they know you will be using the loan for this purpose.

A personal loan is a loan for which the borrower receives a one-time, lump sum amount of money and repays it, with interest, over a set amount of time in equal installments, typically monthly. Some common uses of personal loans are for debt management, home repairs and maintenance, vacation expenses, and wedding expenses.

Personal loan lenders dictate terms on the uses for the money. Many of these lenders prohibit the use of a personal loan for paying off student loan debt. And you are required to sign a loan agreement that says you will abide by the lender’s terms and forbidden uses.

If you use the money for a prohibited purpose and the lender learns this, you could be held responsible for paying back the full amount immediately. Also, knowingly providing false information on a loan application is considered fraud and is a crime.

For many people looking to replace their federal student loan with another type of repayment, student loan refinancing presents more attractive options than getting a personal loan. Using other loans to pay off student loans requires careful consideration.

Why Refinancing Your Student Loans Might Be a Better Plan

When it comes to either reducing your monthly payment on your loans or paying less in interest, you may want to consider refinancing your student loans with private student loans. (Note: You may pay more interest over the life of the loan if you refinance with an extended term.)

Refinancing your student loans means that you take out a new private student loan to pay off your existing student debt. When you do this, you might be able to save money if you qualify for a lower interest rate on your private student loan than on a personal loan. Interest rates vary but the average private student loan interest rate ranges from 4% to almost 15%. The national average on a personal loan was 11.48% in Q2 2023, according to the Federal Reserve.

You might also consider getting a longer-term private student loan with lower monthly payments. This will likely mean that you’ll pay more in interest over the life of your loan, but that could give your budget some breathing room. A student loan refinancing calculator can help show how much you may be able to save each month by refinancing your existing student loans.

While refinancing student loans may help students save money, refinancing federal student loans means forfeiting benefits that you might otherwise qualify for, such as deferment, forbearance, and income-driven repayment plans.

While private student loans don’t offer the same protections and benefits as federal student loans, some do offer deferment or forbearance in certain circumstances. Personal loans do not typically offer these benefits.



💡 Quick Tip: Get flexible terms and competitive rates when you refinance your student loan with SoFi.

Pros of Using Personal Loans to Pay off Student Debt

Let’s say you have found a lender who doesn’t prohibit using a personal loan to pay off student debt and you want to go forward.

There are a few possible benefits in certain circumstances.

•  A potential reduction in the amount of interest that you’re paying if you manage to qualify for a lower rate on your personal loan than what you’re paying for the student loan.

•  You might qualify for a different loan term — or length — potentially reducing your monthly payments by spreading them out over a longer period of time.

•  It is difficult (though not impossible) to discharge a student loan in a bankruptcy. In some cases, it is easier to discharge a personal loan.

Cons of Using Personal Loans to Pay off Student Debt

There are some large drawbacks to consider. It doesn’t make much sense to trade in one loan for another with higher interest. The interest rate on a federal student loan is currently 5.5% for an undergraduate degree and 7% for a graduate degree. As stated above, the national average on a personal loan was 11.48% in Q2 2023, according to the Federal Reserve.

Here are other cons:

•  You’ll forfeit protections and benefits of federal student loans such as the six-month grace period after graduation and the ability to defer or forbear your loans.

•  If you have federal student loans, you also lose the opportunity to use income-driven repayment plans to repay your loans and to take part in any student loan forgiveness programs.

•  If you pursue a personal loan to pay for student loans even though the lender prohibits that use and it is discovered, the loan will be canceled if not yet disbursed, you may have to repay the full amount immediately, and you are open to criminal prosecution for fraud.

•  The lender will assess your creditworthiness, which typically includes checking your credit, during the approval process. A “hard check” usually deducts several points from your credit rating temporarily. Most federal student loans don’t require a hard credit check.

Pros of Using Personal Loans to Pay off Student Debt

 Cons of Using Personal Loans to Pay off Student Debt
You may possibly qualify for a lower interest rate on a personal loan than you have on your student loan. Loss of some protections that typically come with federal student loans, such as deferment and forbearance.
If you manage to qualify for a longer loan term, your monthly payments could decrease by stretching them out over a longer period of time. You won’t be able to use an income-driven repayment plan if you replace federal student loans with a personal loan.
Personal loans may be able to be discharged in bankruptcy, unlike student loans, which typically cannot be. Your creditworthiness is a factor in personal loan approval, unlike federal student loans, most of which don’t require a credit check.

Starting to Repay Your Student Loan Debt

When you graduate from college, you don’t have to start repaying your federal student loans right away.

Some federal student loans have a student loan grace period of 6 months, but with some it can last as long as 9 months. Interest may accrue while your loans are in the grace period, so some people make interest-only payments so that the total loan balance does not increase.

If you’re unable to pay your federal student loans after the grace period ends, you may be able to defer your loans for a number of reasons including if you’re returning to school, are unemployed, or have recently been on active duty service in the military.

But what happens if you can’t afford your payments but don’t fit any of those criteria and don’t have any other help paying for school?

As your salary increases, you will likely be better financially able to pay your loans but, in the first few years after graduation your salary may not cover much more than basic expenses.

There are other ways you can lower your payments.

Recommended: Examining How Student Loan Deferment Works

Basing Student Loan Payments Off Your Monthly Income

After a three-year pause due to Covid-19 hardship, the Debt Ceiling Bill required federal student loan payments to resume, with interest accrual restarting on Sept. 1, 2023 and payments due starting in October.

If you’re struggling to cover your basic monthly living expenses, you might want to look into the “On-Ramp” created by President Joe Biden earlier this year. Running from October 1, 2023 to September 30, 2024, the plan specifies that financially vulnerable borrowers who miss monthly payments during this period are not considered delinquent, reported to credit bureaus, placed in default, or referred to debt collection agencies.

Another option is enrolling in an income-driven repayment program.

There are various repayment plans to choose from that allow you to limit your monthly payments to a percentage of your monthly discretionary income. That will often reduce your monthly payments to a more manageable level.

President Biden’s Saving on a Valuable Education (SAVE) Plan is replacing other IDR programs as the main offering of the Department of Education. Like other plans, it calculates your monthly payment amount based on your income and family size. The SAVE Plan provides the lowest monthly payments of any IDR plan available to nearly all student borrowers, says the DOE.

After 20 to 25 years of on-time student loan payments — or 10 years if you’re enrolled in the Public Service Loan Forgiveness Program — your loans may qualify to be forgiven under these repayment plans. If you’re interested in enrolling in one of these plans, contact your student loan servicer for information on how to do so.

Recommended: The SAVE Plan: What Student Loan Borrowers Need to Know About the New Repayment Plan

The Takeaway

When deciding whether to use a personal loan or student loan refinancing to pay off existing student debt, there are many options to choose from. A good way to begin is to consider your current budget (how much money do you have to allocate toward student loan payments), what your goal is (e.g., lowering your interest rate, lowering your monthly payment, paying off the debt as soon as possible), and other overall financial goals.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.


SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.


Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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What Percentage of Your Income Should Go to Student Loans?

By | Budgeting & Goals, Fresh Out of School, Student Loans, student_loan | No Comments

After four (or more) years of classes, college students graduate into a new reality: employment and student loan payments. Navigating repayment may require planning and diligent budgeting, but with the right foundation, you can find a repayment plan that works for your personal needs.

As a general rule of thumb, the Consumer Financial Protection Bureau (CFPB) recommends limiting the total borrowed to no more than your expected starting annual salary when you leave school. But, when young students are selecting colleges and evaluating costs, it can be tough to understand or predict how much they’ll earn after graduating.

Here are some potential strategies for student loan repayment so you can determine what percentage of your income should go to paying student loans.

Calculate How Much Your Loan Costs Each Month

You’ll want to understand how much your loan costs each month. If you only have one student loan, this may be easy — the total would be your monthly loan payment.

If you have multiple loans with different lenders, you may have to do a bit more math to sum up the total amount you are spending on your loan payments monthly.

If, after calculating your monthly loan payments, you find you are spending a much higher percentage of your income on debt payments than you have outlined, you may want to adjust your budget, or see if you can adjust how much you are paying each month to your student loans.

Keep in mind that lengthening the loan term on your student loans may result in lower monthly payments, but may cost more in interest over the life of the loan.



💡 Quick Tip: Get flexible terms and competitive rates when you refinance your student loan with SoFi.

Determining Your Student Loan Payment as a Percentage of Income

When it comes to repaying your student loans, your first goal might be to make, at the very least, the minimum monthly payment on each of your student loans. Failing to do so means your loan could become delinquent, and after 90 days of delinquency, your loan servicer can report the late or missed payments to the credit bureaus and your credit score may be affected.

If you don’t know what your monthly payments are, you can use our student loan calculator to get an estimate. It can give you a good idea of what you’ll pay each month.

To calculate the percentage of your income, divide your total monthly loan payment by your income. For example, if your monthly loan payment was $400 and your monthly income was $5,000, your loan payment would be 8% of your monthly income.

Consider the 50/30/20 Rule and Tweak it for Debt

The 50/30/20 budgeting rule outlines spending in the following categories:

•   50% of your income is budgeted toward needs

•   30% of your income is budgeted toward wants and discretionary expenses

•   20% of your income is allocated for savings and paying off debt

Using the general framework can help borrowers create a budget that makes sense for their lifestyle and needs, without being overly prescriptive. If you have a lot of student loan debt that you are focusing on repaying, you can adjust the percentage allocation so that you are funneling more money toward your debt.

Because on-time payments account for 35% of your FICO® score, setting up a budget that helps you make on-time payments each month is one of the best tips for building credit.

Income-Driven Repayment

If you have federal student loans and are struggling to make payments on the standard 10-year repayment plan, one alternative you could consider is income-driven repayment (IDR). On an income-driven repayment plan, your monthly payments are determined as a percentage of your income.

There are four options for income-driven repayment. Depending on the plan you enroll in, the repayment term is extended to 20-25 years and payments are capped at 10% to 20% of your income. More precisely, the payment amount is calculated as a percentage of your discretionary income — the income that is left after subtracting taxes and other mandatory living expenses.

The most recent addition to IDR options is the Saving on a Valuable Education (SAVE) program, which replaces the Revised Pay As You Earn (REPAYE) program. SAVE caps payments to 10% of discretionary income (that threshold will drop to 5% for undergraduates starting in July 2024) and shields more income from the payment calculation. Additionally, if your payments are too low to cover accrued interest charges, the government subsidizes the difference so that your balance doesn’t balloon over time.

While income-driven repayment plans might help make monthly payments more manageable, extending the length of the loan means you could end up paying more interest than you would on the standard repayment plan. The good news is that if you still have a balance at the end of the repayment term, your remaining debt is discharged (although it may be taxed).

Making Extra Payments Based on Your Monthly Income

If you want to accelerate your student loan repayment, consider paying an additional percentage of your income toward student loans. If you are using a 50/30/20 budget, but want to make monthly overpayments, you may instead choose to do a 50/25/25 budget, where you reduce your discretionary spending by 5% each month and apply those funds as an additional student loan payment instead.

Only you can determine where you want to focus your financial energy. An online student loan payoff calculator could help determine how much your overpayment could accelerate your loan payoff and save you in interest.

Recommended: 7 Tips to Lower Your Student Loan Payments

Additional Options for Accelerating Your Student Loan Repayment

If your budget is already lean and you don’t have the room to contribute extra income toward student loans every month, there are alternatives that could help you speed up your repayment plan.

Part-Time Job or Side Hustle

One idea is to pick up a part-time job or find a side hustle that allows you to bring in a little bit of extra cash. Then you could focus all of your side hustle income toward student loan repayment. It’s money you didn’t have before, so your budget won’t have to make any sacrifices.

Another option is to focus any unexpected or windfall money toward student loan repayment. When you receive a bonus at work or a birthday check from Aunt Edna, you could contribute that money to your student loans instead of spending it on a splurge expense for yourself.

Student Loan Refinancing

Finally, you can also improve your existing federal or private student loan situation. Student loan refinancing could help you secure a lower interest rate, which could mean spending less money over the life of the loan.

Recommended: Should You Refinance Your Student Loans?

As part of the refinancing process, you’ll be able to select a new repayment term. Shortening the repayment term could also mean you pay less in interest over the life of the loan. You also have the option to lengthen the loan term. If you do, you’ll spend more money in interest over that longer term, but it could mean a lower monthly payment if you need to free up some cash.

When you apply to refinance a student loan, lenders will review your credit history and employment history, among other factors. Refinancing student loans with bad credit, while possible, may be more challenging. Those with a low credit score or limited credit history may want to consider establishing credit before they apply for refinancing.

Another option for borrowers with a less-than-stellar credit score may be adding a cosigner to strengthen the application. A cosigner agrees to repay the loan if the primary borrower fails to do so. Refinancing without a cosigner may make sense for borrowers who have had time to establish credit. For more detailed information, visit SoFi’s student loan refinancing guide.

It is important to note that if you refinance your federal loans with a private lender, you will lose access to federal benefits such as loan forgiveness or income-driven repayment plans.

To find out how student loan refinancing could help improve your student loan repayment prospects, use SoFi’s student loan refinance calculator.

The Takeaway

There is no single answer for what percentage of your income should be allocated to paying off student loan debt. It’s important to make your monthly minimum payments to avoid delinquency or default. Beyond that, you may consider making overpayments to accelerate your student loan payoff.

When you refinance with SoFi, there are no origination fees or prepayment penalties and you’ll gain access community events. You can start the application online and find out what interest rate you pre-qualify for in just minutes.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.


With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.


Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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